Employers Who Don’t Carry Work Comp Coverage Risk Personal Exposure

Small business owners are always looking for ways to reduce overhead.  Many times, they do so by calling their employees independent contractors.  This allows them to avoid paying for things like unemployment and worker’s compensation coverage.  However, these business owners may find themselves in serious financial peril if one of their “independent contractors” is badly injured on the job.

Under the Michigan Worker’s Disability Compensation Act, just calling an employee and independent contractor is not enough to avoid liability.  The state agency that oversees work comp will review the entire situation and make its own determination regarding the injured party’s employment status.  The agency will look at things like whether the worker controls his own hours and schedule, is paid hourly, provides his own tools and supplies, and whether he does independent contracting for other companies or individuals. 

If it is determined the injured party is an employee, then the employer will be on the hook for work comp benefits.  If the worker is catastrophically injured, paying out on such a claim without insurance to back you up can bankrupt your company.  Even worse, it can bankrupt your family.  The law provides that, for any company that illegally neglects to carry work comp, the officers and owners of the company are personally liable to pay the claims of their injured workers.  There have been cases where business owners have been forced to do things like take out a second mortgage on their homes, when work comp coverage would have only been a few thousand dollars per year.

If you’ve been injured, or if you have questions about work comp or small business litigation, call the experts at Bolhouse, Hofstee & McLean, P.C.

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